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Investment Glossary

This guide is designed to help you understand the information contained in our fund factsheets. If you are in doubt as to whether any of the Aviva Investors collective investment funds are suitable for you and you wish to seek financial advice, you should contact your financial adviser. An adviser is likely to charge you for advice. However, they can assess your situation and tell you whether the fund you’re thinking about investing in is suitable for you. If you do not have a financial adviser, you can find one by visiting www.unbiased.co.uk For further investment terms, visit www.theinvestmentassociation.org/all-about-investment/glossary.html

If you have any questions please call us on 0800 051 2003*.

A - Z of terms

Absolute return

The return that an asset achieves over a certain period of time. This measure looks at the appreciation or depreciation, expressed as a percentage, which an asset, such as a stock or a mutual fund, achieves over a given period of time.

Accumulation Shares/Units

These are shares or units where income is kept within the fund and is reflected in the price of the shares/units.

This type of unit/share typically attracts investors looking for growth rather than income.

Active

Where the fund manager uses their expertise to pick investments to achieve the fund’s objectives – we say clearly which of our fund are actively managed which is the vast majority.

Advanced/developed markets

Countries with relatively high levels of personal income and established economies.

Adventurous (risk range)

Is the term given to a fund/portfolio that seeks to provide higher levels of capital growth by taking on more risk.

Aggressive asset allocation

A fund of this type will typically be invested in a varied range of stocks, bonds and cash. An aggressive asset allocation takes on higher risks and as such has a relatively high exposure to equities.

Alternatives

Usually refers to a range of investment asset types excluding the mainstream categories of equities, bonds and cash or cash-like assets. The most prominent examples of alternatives are derivatives, hedge funds, property and commodities.

Alternative trading strategies

These could enable investors to access a wide range of markets and asset classes, including indices, commodities, foreign exchange and equities. They can include derivatives, absolute-return funds, hedge funds and private equity.

Any given three year period

Any period of three years, no matter which day you start on.

Asset allocation

Funds invest in different types of assets such as equities (shares), bonds, property and cash. The asset allocation shows the types of assets the fund invests in and the proportion of the fund invested in each one.

Asset- and mortgage-backed securities

If these securities are paid off substantially earlier or later than expected, the sub-fund could experience lower earnings than expected. These securities also carry market risk, interest rate risk, and above-average liquidity risk.

Asset class

The different financial instruments or types of investment which investors, including fund managers can buy, e.g shares, bonds, commodities or property. Each asset classes has different characteristics in terms of income and capital generated. The choice of which asset class to invest in depends on your view of the wider economy, your risk appetite, and your investment needs and goals.

Auditor

An individual or company who inspects and verifies the accuracy of a company’s operational and/or financial records.

Aviva Investors Responsible Investment Policy

Balanced

Balanced funds are mutual funds that invest money across asset classes, a mix of low- to medium-risk stocks, bonds, and other securities. Their holdings are balanced between equity and debt, with their objective between growth and income.

Bank of England base rate

The interest rate that the Bank of England will charge to lend money to a commercial bank.

Benchmark

The performance of a fund is often compared with a benchmark or a performance indicator. A benchmark can be an index, combination of indices, hypothetical fund, or peer group universe. When a fund is managed against a specified benchmark, it aims to match or outperform this benchmark. Only a few of our funds are managed against a benchmark. These include the Aviva Investors UK Index Tracking Fund and the Aviva Investors International Index Tracking Fund.

Beta

In relation to investment, beta is a measure of the volatility of a security’s price relative to the market as a whole usually represented by an index.

Bid to bid

The bid price is usually the selling price of a share or unit as it is the highest price a buyer is willing to pay. Bid to bid simply means performance has been calculated on a like for like basis.

Bonds

These are interest bearing securities which entitle holders to regular interest and repayment at maturity. They are commonly issued by both companies and governments and include global convertibles, UK gilts, UK corporate bonds, global bonds and emerging-market bonds.

Bottom-up

An investment approach that focuses on analysing individual shares rather than stock markets.

Capital growth

The increase in the value of your capital (ie. the amount you invest), excluding any income. Capital growth funds aim to choose investments that will increase in value over time. They are not constrained to provide an income. They may, for example, seek out undervalued companies to invest in.

Capital markets

Markets that raise money from those who want to invest and make those funds available to businesses or governments.

Cash and equivalents

Cash equivalents are one of the three main asset classes, along with shares and bonds. These securities have a low-risk, low-return profile. Cash equivalents include US government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

Cash flows

The movement of money into or out of a business/financial product during a specified, limited period of time.

Collective investment risk

Investing in any type of collective investment involves certain risks and limitations that you would not face if investing in markets directly, including the risk of delay in liquidating your investment.

Commodities

Comparator benchmark

This is when a fund uses a benchmark for the purposes of performance comparison, it is not a constraint or a target of the fund, but is useful to look at to see how the fund has performed compared with it. Many of the Aviva Investors funds have comparator benchmarks, they are named in the Risk and Performance Management section and we will show the funds performance against them whenever we show the past performance of the fund. It is also an FCA defined term.

Composite benchmark

This is a mixture of Indices, so more than one index is combined to make a new combined benchmark. Each fund that uses a composite benchmark will describe which mixture of indices are used to create the hybrid benchmark.

Constraining benchmark

This is an FCA term to describe when a benchmark is used to restrict where and how a fund can invest, an example would be when an index tracking fund passively tracks an index, this type of fund is constrained and has to invest in the index benchmark named. Most Aviva Investors actively managed funds do not have Constraining Benchmarks.

Convertible bonds

These are issued by companies wanting to borrow money from investors for a specified period and at a fixed rate of interest.

Contingent convertible securities (coco bonds)

Are a debt instrument issued by European financial institutions. Contingent convertibles work in a fashion similar to traditional convertible bonds. They have a specific strike price that once breached, can convert the bond into equity or stock. Coco bonds are high yield but also high risk.

Consumer goods

Consumer goods are products that are purchased for consumption by the average consumer. Consumer goods are the end result of production and manufacturing and are what a consumer will see on the store shelf. Clothing, food and jewellery are all examples of consumer goods. Basic materials such as copper are not considered consumer goods because they must be transformed into usable products.

Core investment

This is the section in the fund Objective and Policy that describes the main instruments the fund will invest in to try and deliver the aims.

Corporate bond

As per Bond, these are specific bonds issued by companies so they are called “corporate”.

Counterparty

An opposite party in a contract or financial transaction.

Counterparty risk

The fund could lose money if an entity with which it does business becomes unwilling or is unable to meet its obligations to the fund.

Collective investment schemes

Generally, funds which pool investors’ money and invest on their behalf. The only forms of collective investment scheme that are permitted in the UK for offer to members of the public are unit trusts and investment companies of variable capital.

Credit maturity

This shows the time remaining to maturity of the bonds held by the fund. Generally, the longer the duration of a holding is, the greater the price’s sensitivity to any changes in interest rates.

Credit quality

Independent ratings agencies assign different ratings to bonds depending on the bond issuers’ financial strength and their outlook as well as their ability to pay interest on time and meet all of their liabilities

Custodian

A firm (often a subsidiary of a major banking group) that is authorised to keep safe assets for other parties. In relation to authorised investment funds, the trustee or depositary is responsible for custody or safekeeping of fund assets but it may contract a custodian to undertake this task on its behalf.

Credit rating

Independent ratings agencies assign different ratings to bonds depending on the bond issuers’ financial strength and their outlook as well as their ability to pay interest on time and meet all of their liabilities. We use ratings supplied by Standard & Poor’s. The most secure bonds are rated AAA and those at the lowest end are rated D. NR stands for issuers that are “Not Rated”.

Currency exposure

The potential for a fund that invests overseas to lose or gain money purely because of changes in the currency exchange rate.

Currency risk

Defensive sectors

Aims to provide a constant dividend and/or stable earnings regardless of the state of the overall stock market.

Default risk

Issuers of certain bonds or money market instruments could become unable to make payments on their bonds, causing a reduction in income to the fund and also in the value of bonds held by the fund. Under extreme market or economic conditions, defaults could be widespread and their effect on fund performance significant.

Defensive asset allocation

A fund of this type will typically be invested in a varied range of stocks, bonds and cash. A defensive asset allocation aims to take little risk and as such generally has a low exposure to equities.

Derivatives

These are investments whose value depends on another financial asset, for example the price of a bond, currency or share. Derivatives can be used by fund managers to control particular aspects of a fund’s risk, or as an investment in their own right.

Derivatives risk

Derivatives are instruments that can be complex and highly volatile, have some degree of unpredictability (especially in unusual market conditions), and can create losses significantly greater than the cost of the derivative itself.

Distribution

Income generated which has either been paid to you (income shares) or has been added to the value of your investment in the fund (accumulation shares).

Distribution yield

This reflects the amount that is expected to be distributed over the next year as a percentage of the share price of the fund on the date shown. It does not include the deduction of entry charges and is the gross return before tax on distributions. You may be subject to further tax on your distributions. The yield is not guaranteed.

Diversification

A strategy where you invest in a range of asset classes or geographical regions or industry sectors to spread your risk (i.e. not putting all your eggs in one basket).It is the term used to describe the spreading of risk when you invest and is vitally important to fund managers.

Duration of holdings

This shows the time remaining to maturity of cash and cash equivalent assets held by the fund. Where an asset has no fixed term this is included in the 0-1 Days figure.

Duration

A measurement of a bond’s price sensitivity to changes in interest rates. A high-duration bond, or one whose maturity date is a long way out in the future, is more sensitive to interest rate changes than a bond with a shorter maturity date.

Efficient portfolio management

Managing the fund in a way that is designed to reduce risk or cost and/or generate extra income or growth.

Entry charge

A charge may be taken from your money before it is invested. The charge is usually a percentage of the amount invested and is additional to the price paid for the units/shares. The entry charge is deducted from the investment before units/shares are bought and is also known as the “initial charge”.

Equities (shares)

A security providing ownership rights to a company. Equities can be categorised by geography (such as UK equities, US equities and global equities) or company size (eg small cap, mid cap and large cap).

Exit charge

A charge levied on redemption of units/shares in place of or in combination with an entry charge. This is also known as a “redemption charge”. Please note that Aviva Investors collective investment funds do not currently have exit charges.

Emerging market

In investment terms, countries whose financial markets are less developed and where investor protection and market infrastructure is often weaker than in developed markets such as the UK.

It can be more difficult to buy assets in such markets, prices of assets are likely to be more volatile and it can be difficult to sell assets quickly at an acceptable price.

Emerging markets risk

Compared to developed markets, emerging markets can have greater political instability and limited investor rights and freedoms, and their securities can carry higher equity, market, liquidity, credit and currency risk.

Equities risk

Equities can lose value rapidly, can remain at low prices indefinitely, and generally involve higher risks — especially market risk — than bonds or money market instruments. Bankruptcy or other financial restructuring can cause the issuer’s equities to lose most or all of their value.

It is, therefore, regarded as more risky to invest in such markets than in developed markets, even though higher returns may be earned over time. Authorised investment funds that are permitted to be offered to members of the public in the UK may invest in emerging markets only if they meet certain conditions.

Equities of small and mid-size companies

Can be more volatile, and harder to sell, than those of larger companies.

ESG

Environmental, social and governance – ESG criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls and shareholder rights.

Fixed income

Fixed income refers to any type of investment under which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule.

Fixed Income risk

Investments in fixed interest securities are impacted by market and credit risk and are sensitive to changes in interest rates and market expectations of future inflation. Bonds that produce a higher level of income usually have a greater risk of default.

Frontier markets

Countries that are more established than the least developed countries but still less established than emerging markets.

FTSE® All Share Index*

An index that measures the performance of the shares of all companies listed on the London Stock Exchange.

FTSE® 100 Index*

An index that measures the performance of the shares of the 100 largest companies listed on the London Stock Exchange. It measures the daily share price performance of those 100 firms.

FTSE® 250 Index*

The FTSE 250 measures the performance of the shares of the 250 largest companies listed on the London Stock Exchange not included in the FTSE 100 index.

FTSE® European Index Series*

These measure the performance of companies resident and incorporated in Europe. They are comprised of three real-time tradable indices, which are designed for trading of derivatives, index-tracking funds, exchange traded funds and performance benchmarks. All indices are calculated and published in euros.

Fund aim

These measure the performance of companies resident and incorporated in Europe. They are comprised of three real-time tradable indices, which are designed for trading of derivatives, index-tracking funds, exchange traded funds and performance benchmarks. All indices are calculated and published in euros.

Fund launch date

The date that the fund was opened.

Fund size

The total value of the assets managed within the fund.

Fund manager

The fund manager decides when and where to invest the money pooled from the investors in the fund. Their decisions and management of the fund are governed by the investment objective and investment policy of the fund as set out in the Prospectus.

Forwards

A contract between two parties to buy or sell an asset as a specified future time at a price agreed upon today.

FMF (Fund Management Fee)

The fund management fee is a single fixed rate charge to cover the underlying fees, costs and expenses of operating and administrating the fund. It accrues daily and is calculated as a percentage of the net asset value of the fund. The underlying fees, costs and expenses covered by the fund management fee may fluctuate.

Fund manager report

This is a brief view from the fund manager of reasons behind the recent performance of the fund, plus the outlook for possible market and economic conditions that may affect the fund.

Growth

Hedge – as in “to hedge” a position.

Making an investment to reduce the risk of adverse price movements in an asset is known as a hedge. Normally, a hedge consists of taking an offsetting position in a related asset.

Hedging risk

Any measures taken to offset specific risks will generate costs (which reduce performance), could work imperfectly or not at all, and if they do work will reduce opportunities for gain.

High-yield bonds

These bonds generally have a higher risk of issuer default than bonds of a higher credit rating (see Credit Quality). Because of this risk however, the yield on these bonds is typically higher.

Historic yield

This reflects the distributions declared over the past year as a percentage of the share/unit price on the date shown. The reported yield does not include entry charges and you may be subject to further tax on your distributions. If a portion of the fund’s expenses are charged to capital, this has the effect of increasing the distributions for the year and constraining the fund’s capital performance to an equivalent extent. This is calculated by looking at the income the fund has paid over the last year and dividing it by the current price.

For example:

Income paid by each unit/share over the last year: 4.2p.
Current price of each unit/share: 100p.
Historic yield = 4.2 ÷ 100 = 0.042 or 4.2 per cent.

Income

Money paid out by an investment, such as interest from a bond or a dividend from a share.

Income shares/units

These are shares or units where income is paid out (or reinvested in buying additional shares or units).

This type of unit/share typically attracts investors looking for income rather than capital appreciation.

Index

A recognised industry combination of investments based on specific criteria that is specified by the index criteria. An index may be used as a Benchmark - see Benchmark definitions.

Investment

Investments can include equities, bonds, property or other assets, whether owned directly or through an investment fund. For instance, shares/units you have bought from us are investments.

Illiquid security

An asset that cannot easily be sold or exchanged for cash without a substantial loss in value.

Investment objective

The aim of a fund will generally be to generate income, capital growth or a combination of the two, and/or to provide capital protection.

Information ratio

Information ratio shows the consistency of the fund manager in generating superior risk adjusted performance. A higher information ratio shows that fund manager has outperformed other fund managers and has delivered consistent returns over a specified period.

Investment manager

The company or individual to whom the fund provider company delegates responsibility for deciding how to invest the money in the fund assets.

Investment trusts

These are listed public companies whose business it is to hold and manage a portfolio of investments. Their shares are dealt on the stock exchange.

Investment grade

When a bond is rated investment grade, its issuer is considered able to meet its obligations, exposing bondholders to a perceived lower default risk.

Inflation risk

Yields on money market instruments may be less than the rate of inflation, meaning that an investor’s purchasing power may erode over time.

Interest rate risk — money market instruments

Interest rate risk — bonds

When interest rates rise, bond values generally fall. This risk is generally greater for longer-term bonds and for bonds with higher credit quality.

IA Sector

Funds are grouped into sectors, so that funds with similar characteristics are classed together. This makes it easier to make a fair comparison of funds. The Investment Association (IA) represents the UK investment management industry. There are over 30 IA sectors, for example UK Equity Income, Property and Specialist sectors. Sectors are mostly based on assets and their geographical focus. You can use sectors to compare funds’ performance and charges.

Issuer

An issuer is a legal entity that develops, registers and sells securities for the purpose of financing its operations.

Leverage

Is the term given to longer term borrowing by a fund. The objective of leverage is to borrow money and invest it in assets that will earn a profit,- which is greater than the cost of borrowing, thereby enhancing the return to investors. Authorised investment funds that are UCITS are not permitted to leverage up’ in this way. Generally, they may only borrow for the short term, to a limited extent (up to 10% of the funds value), and only for the purposes of managing cash flow. Non-UCITS Retail funds (e.g. property funds) can undertake a modest amount of leverage.

Leverage risk

A small price decline on a “leveraged” underlying investment will create a correspondingly larger loss for the fund. A high overall level of leverage and/or unusual market conditions could create significant losses for the fund.

Liquidity

In investment terms, an investment is ‘liquid’ if it can be bought or sold easily and quickly, and, if it is a listed or traded investment, without its market price moving sharply.

Liquidity risk

In unusual market conditions, the fund could have difficulty selling securities, which could cause it to suffer losses, defer redemption payments or suspend dealing in Shares.

Long (or long position)

This is a position held by a fund, which can increase in value if the underlying asset rises in value. Exposure to long positions are used when there is an expectation that the asset will rise in value.

Market capitalisation

The company size, or market capitalisation, is determined by the total current value of the company’s shares. If the fund holds equities (shares) then this chart shows the size bands (£) of the companies in which the fund invests.

Market conditions

A term that refers to the state of an industry or economy.

Market share

The portion of a market controlled by a particular company or product.

Market risk

Prices of many securities (including bonds, equities and derivatives) change continuously, and can at times fall rapidly and unpredictably.

Mid to mid

This is a classification of the pricing for a single-priced fund. A mid price is the price between the best price of the sellers of the shares and the best price of the buyers. It represents the average of the current buying and selling prices being quoted. In some cases, the mid price will be rounded up or down to the nearest valid tradable price on the exchange system for convenience purposes and therefore will not be the exact average. Mid to mid means the performance has been calculated on a like-for-like basis.

Managed funds

Holdings in other funds where no further breakdown of assets is available to incorporate in the chart.

Money markets

The markets in which borrowers, such as governments, or companies, raise money by selling short term debt instruments, to short term investors. The debt instruments usually have a maturity (ie. the time when debt needs to be repaid) of less than one year, and sometimes as little as a few days or weeks. They appear in a variety of forms, such as commercial paper (issued by anyone), certificates of deposit (issued by banks) or gilts or bills (issued by governments).

Modified duration

Modified duration is a formula that expresses the measurable change in the value of a security in response to a change in interest rates. Modified duration follows the concept that interest rates and bond prices move in opposite directions.

Modified duration to worst

Yield change calculated to the priced to worst date; generally used to reflect the behavioural characteristics of a bond as of a specific price/yield and date.

MSCI® All Country World Index

The MSCI® All Country World Index (ACWI) is a market capitalization weighted index designed to provide a broad measure of equity market performance throughout the world.

Non-classified/other

This category represents all other assets that the fund invests in. This category may also include holdings where there is no accessible data or the holdings are newly registered and the data is not accessible yet.

NAV calculation (Net Asset Value calculation)

The Net Asset Value of all a fund’s assets and liabilities.

Non investment grade bonds

A bond rating that signifies low credit quality with a relatively high risk of defaulting.

Ongoing charge

This charge is levied by the fund management company to cover the costs and expenses of managing funds. The ongoing charge excludes any performance fees or portfolio transaction costs, except where paid to the manager, the depositary or trustee and custodian of the funds. Where a fund invests a significant proportion of its assets in other funds it includes the impact of the charges made in those other funds. Charges are normally deducted on a daily basis and reflected in the price of the units/shares. This means that you will not see them shown on your statement and do not need to pay for them separately.

Operational risk

Human error or process/system failures, internally or at our service providers, could create losses for the fund.

Outperformance

Outperform is when an investment is expected to perform better than the return generated by a particular index or the overall market. Since the performance of many investments is compared to a benchmark index, outperform refers to a higher return on an investment than a particular benchmark over time.

Passive

The fund manager aims to track the performance of a stock exchange index or another investment.

Platform

An online service that allows you to buy and sell shares and funds and see your investments in one place.

Property

This includes buildings and/or the land belonging to them. Any property that is attached directly to land, as well as the land itself, is called “Real Property” which not only includes buildings and other structures, but also associated rights and interests.

Primary share class

All share classes are allocated to IA sectors but only one share class is listed for performance comparison. This share class is known as the primary share class. Only primary share classes can show a quartile ranking.

Property sectors

If the fund holds properties then this chart shows the type of properties in which the fund invests. This may include retail, offices and industrial properties.

Past performance

The chart/table in the factsheets shows the performance of the fund in percentage terms over the last one month, three months, six months, year, three years, five years and since inception compared with it’s benchmark.

Please note past performance is not a guide to the future. The past performance shown in our factsheets is net of ongoing charges but doesn’t take into account any entry or exit charges.

Prospectus

A document containing information about the fund. It is more detailed than the Key Investor Information Document (KIID), simplified prospectus and key features document. A copy of the Prospectus is available on our website.

Pricing basis risk

If we change the pricing basis of the sub-fund, this may protect investors from the effect of trading costs, but could, based on historical data, decrease the value of the fund by as much as 6% or more.

Quartile rank

This is the rank of the fund that is sometimes displayed with the fund’s performance. This is a measure of how well a fund has performed against all other funds within its IA sector. Quartile rankings are compiled by sorting the funds by performance over a specified time period. Funds in the top 25 per cent performance bracket are assigned a quartile ranking of one, the next 25 per cent are assigned a ranking of two, the next 25 per cent are given a three and the bottom 25 per cent are assigned a ranking of four.

Rayner Spencer Mills Research (RSMR Group)

ratings are given to funds that are believed to have reached the required standard to be the best in their sector by the rating agency RSMR Group. These funds may have different methods of investing but all have produced good performance backed up by a defined and understandable process. RSMR ratings don’t have grades.

Regional/Country allocation chart

Funds can invest in different countries. The chart in this section shows the top ten countries the fund invests in and the proportion invested in each one. In this chart the “Other” category typically represents all other countries not named that the fund invests a very small proportion in, often less than 1 per cent for each country.

Ratings

There are several independent companies who monitor funds, provide ratings and give awards to top performing funds or fund managers.

Real estate investments risk

Values of these investments, and any earnings the fund receives from them, could fluctuate more than with bonds or shares, and can be hurt by many factors, such as changing demographics, high tax rates or non-payments of rent. Since real estate valuations are somewhat subjective, an asset may prove to be worth less than it was valued at.

Risk and Performance measurement

This is the section of the prospectus that details how we compare the funds performance against benchmarks, it describes the benchmarks used and how we compare against them.

Risk adjusted return

A risk-adjusted return takes into account the amount of risk required to achieve a return and is typically calculated using one of several formulas.

Risk summary

This is a summary of key risks that apply when investing in the fund. Further information about these risks can be found in the Key Investor Information Document and Prospectus. Copies in English can be obtained free of charge from our website www.avivainvestors.com or you can order copies by contacting us on 0800 051 2003*

*Calls to this number may be recorded for training and monitoring purposes, and to comply with applicable law and regulations. Calls are free from UK landlines and mobiles.

Risk profile

A term used to describe the ability or willingness of an investor to accept the risk of loss of capital or the failure to meet certain financial objectives. If you need help to establish your risk profile, you should contact an independent financial adviser or visit a consumer information website such as the Money Advice Service.

Risk range

The highest and lowest levels of risk that a fund is willing to take on to meet its strategic objectives.

Sector allocation/Breakdown

This is a summary of key risks that apply when investing in the fund. Further information about these risks can be found in the Key Investor Information Document and Prospectus. Copies in English can be obtained free of charge from our website www.avivainvestors.com or you can order copies by contacting us on 0800 051 2003*

*Calls to this number may be recorded for training and monitoring purposes, and to comply with applicable law and regulations. Calls are free from UK landlines and mobiles.

Sharpe ratio

The ratio describes how much excess return you are receiving for the extra volatility that you endure for holding a riskier asset.

Share

An equal portion representing part ownership of a company. Can also apply to a fund.

Short (or short posisiton)

This is a position not “owned” by the fund, which can increase in value if the underlying asset falls in value. Exposure to short positions are gained through the use of derivatives.

Square Mile

ratings are based on qualitative research designed to offer advisers a solid foundation for client investment propositions and recommendations.

Sovereign

Bonds issued by a national government in a foreign currency, in order to finance the issuing country’s growth

Stock lending

Process whereby those holding investments (such as a fund) lend them to other parties who pay a fee for borrowing.

Strategy

This is a section of the fund Objective and Policy where we describe the way the investments are chosen for the fund, it details how the fund manager intends to try and achieve the aims of the fund and the type of investments they aim to identify.

Sub Fund

Individual investment funds that when grouped together form a single legal entity.

Sub investment grade bonds

A bond is considered investment grade if it’s rating BBB- or higher by Standard & Poor’s or Baa3 or higher by Moody’s. Any bonds rated lower than this are referred to as sub investment grade bonds. The lower a bond is rated the less likely it is to meet its payment obligations.

Supranational Organisation

An organisation that exists in multiple countries. While, theoretically, supranational could refer to multinational corporations, the term most often describes an international government or quasi-government organisation. Examples include the United Nations and the International Monetary Fund. Supranational organisations often have a direct role in regulation. For example, an international treaty may set up certain standards for international trade. However, enforcement of these provisions is left to individual, sovereign governments.

Target benchmark

This is a benchmark that is used to describe what a fund aims to do, where a fund has a target benchmark the objective will say the fund aims to beat the benchmark, this might be in terms of income paid or a mixture of income and growth. A target benchmark is usually an index but can be other things too like a set amount of growth like 5% per year. A target benchmark might also be a specific amount of outperformance when compared to a benchmark.

Target outcome risk

Any outcomes stated as targets are not guaranteed and may not be achieved.

Top 10 funds

This section lists the ten largest sub-funds, by value that the fund holds.

Top-down

An investment approach that looks at the big picture first, e.g. the economy, then at the detail, like how individual shares are performing.

Top 10 holdings

Some funds invest in hundreds of different companies. This section shows the ten largest assets, by value that the fund holds. Where percentages are hown, these show how much of the total fund is invested in this asset.

Total return swap

A total return swap is a swap agreement in which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of an underlying asset, which includes both the income it generates and any capital gains.

Tracking error

A measure of the risk in an investment portfolio that is due to active management decisions made by the portfolio manager; it indicates how closely a portfolio follows the index to which it is benchmarked.

Transaction costs

Unit

An equal portion representing part ownership of a unit trust fund (note: ‘Share’ has a similar meaning but for funds structured as corporate entities such as an open-ended investment company).

Underlying fund

The investments that make up a mutual fund. The value of a single share or unit of the fund is based on the combined value of its underlying investments.

Underlying fund risk

To the extent that the fund invests in shares of other funds, it takes on the one-time and ongoing costs of those shares. It also takes on the risks of those shares, including the derivatives risk and counterparty risk arising from any embedded derivatives (which are common in Exchange-Trade Funds (ETFs).

Underlying yield

This reflects the annualised income net of expenses of the fund as a percentage of the share price of the fund on the date shown. It does not include the deduction of entry charges and is the gross return before tax on distributions.

Note: The distribution yield is higher than the underlying yield where a portion of the fund’s expenses are charged to capital. This has the effect of increasing the distribution(s) for the year and constraining the fund’s capital performance by an equivalent extent.

Volatility

Volatility target

Volatility is a measure of how much the value of an asset moves up and down. Some funds may have a volatility target for example 75% of global equity volatility.

Year on year performance

This displays the performance of the fund in percentage terms, often over the last five years, with this performance split into separate one-year periods. The periods run up to the latest calendar quarter end.

Yield

The income from an investment, usually stated as a percentage of the value of the investment.

The following terms are commonly used in investment objectives and policies of funds. It should be noted that this list is not exhaustive. The percentage quoted is the minimum amount of the scheme property which may be invested in, for example, the particular sector or geographic area to which the term is applied:

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By accessing this website, you hereby acknowledge that this website is intended for persons that qualify as Professional Clients only. You also certify possessing the experience, knowledge and expertise required to apprehend the risks inherent to financial instruments referred to herein and to make your own investment decisions.

The content of this website is not to be viewed by or used with Retail Clients (investors which are not Professional Clients). Those who are not Professional Clients, are therefore kindly asked to leave this website.

This website is not directed to any person in any jurisdiction where – by reason of that person’s nationality, residence or otherwise – the publication or availability of this website is prohibited. Persons in respect of whom such prohibitions apply must not access this website.

The website and its content are not intended for distribution in the United States or to US persons, who are kindly asked to leave the website as well.

For Professional Clients in the UK and Europe, this website is issued by Aviva Investors Global Services Limited, registered in England No.1151805. Registered Office: St. Helen’s, 1 Undershaft, London EC3P 3DQ. Authorised and regulated in the UK by the Financial Conduct Authority.

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